Where did FTX customer money go? Firm says Bankman-Fried took $2.2B | Hacker News Reader

Where did FTX customer money go? Firm says Bankman-Fried took $2.2B

arstechnica.com

130 pointsmoh_maya59 comments

> The other payment and loan totals described by FTX yesterday were $587 million to Nishad Singh, $246 million to Zixiao "Gary" Wang, $87 million to Ryan Salame, $25 million to John Samuel Trabucco, and $6 million to Caroline Ellison. Singh, Wang, and Ellison have pleaded guilty to criminal fraud charges and are cooperating with government prosecutors.

SBF running off with $2.2B really makes Caroline's $6m look quaint. I mean, why even go after her for (relative) pennies? The compensation gap between SBF and his underlings just goes to show you that wealth inequality exists even in corrupt organizations. Her charges will be far less, but it goes to show you that even in crime you're being stiffed unless you're at the absolute top of the food chain.

They went after her to get to SBF. Basically a "you cooperate with us or you could end up with 20 years in prison yourself."

While SBF received much more, I wonder how much in total benefits everyone received. The penthouse, private jets, and vacations probably add up quick.

Compared to SBF's 2.2 billion, Singh's 587 million or even Wang's 246 million, a couple of years of jetsetting in private jets and free rent on an apartment is a rounding error.

They're going after her because she enabled the much larger theft, not just because she took six mil herself.

I understand why they went after her (although stealing 6 million should also be punished, even if no one else stole anything).

I was respond to:

> While SBF received much more, I wonder how much in total benefits everyone received. The penthouse, private jets, and vacations probably add up quick.

They don't add up quick. Not in any meaningful sense.

I wonder why nobody is talking about Trabuco. He was the one Carolina replaced just months away from FTX going down. He is probably more guilty than her. He was however smart enough to see what was cooking and decided to walk away.

this is not “compensation”. it was money borrowed from the company.

If it was truly borrowed, how would it have been repaid? From future compensation. It's just shifting compensation in time.

> why even go after her for (relative) pennies?

Because (potentially) stealing $6 million is still a very large crime in the absolute sense, even if it is smaller than other related crimes. Because it would be bad to alert white-collar criminals to the fact that they can escape prosecution by not being the largest participant in the criminal enterprise. Because $6 million is roughly 1000x larger (not a typo) than the typical bank robbery, which carries a 20-year sentence, and we don't advocate for non-prosecution of $500 bank robberies. Because it's only fair in a justice system that routinely imprisons people for stealing much smaller amounts.

And because she's a juicy target for flipping on the rest of them. In the end she's going to make off much better than the rest, in all likelihood.

Maybe? I would imagine their case is pretty strong without her flipping on the rest of them. She will get some credit for pleading guilty, but she was CEO of a criminal enterprise while it was actively involved in criminal activity. She's not going to die old in prison, but in all likelihood she will do at least 10-15 years.

As things stand today, she could be sentenced to 110 years for what she's already pled to; she's really got to make the prosecutors happy if she ever wants to live outside again.

There is often lots of evidence in fraud cases of what happened, but the mens rea of knowingly committing fraud is bolstered by having a close partner testify. It can otherwise be difficult for the jury to differentiate negligent incompetence from willful fraud, especially in complex scenarios like most financial fraud.

If I've learned anything by reading Popehat (Ken White), it's that the "faces up to X years in prison" lines you see in news articles are totally uninformative - there's a complex set of sentencing guidelines that determines the actual range of possibilities. I don't know what that range is in this case, but I very much doubt the top end is anywhere close to 110 years.

Edit: One such article for illustrative purposes: https://www.popehat.com/2013/02/05/crime-whale-sushi-sentenc... . In this case, the news-headline number is "up to 77 years" and the plausible range Popehat calculates is 2-2.5 years.

IANAL but I understand the top end quotes (110 years in this case) are typically available to judges by ordering sentences to run consecutively.

She's pled to a set of felonies that each carry stiff penalties. A judge would apparently be within the law and federal guidelines to decide that an appropriate sentence is somewhere between the sentence for any one of the charges and below the sentence for running all the sentences consecutively. It's really easy to get sentencing guidelines to arrive at over 100 years for multiple felonies, if you stipulate consecutive sentences.

One notable exception to the typical kid-gloves treatment of financial crime syndicates was Bernie Madoff, who was sentenced to 150 years, the top of the sentencing guidelines.

Madoff refused to cooperate.

Depends what she did in her capacity at Alameda Research - she could've done a lot of bad things even if she wasn't ultimately paid out as much.

Give her a great deal to make her spill every last detail on camera after rejoicing her sentence will be tiny. Then pass all the details and recordings to the Bahamas and let them extradite her back to fox hill prison to rot for decades. That's what I'd do. "The deal was with the DoJ.... not the Bahamas!!!"

The whole reason that you can make deals is because the other party believes you’ll hold up your bargain. Is it really worth giving up the ability of the DoJ to make all future deals, just to punish someone even more heavily one time?

If doing it once means they gave up the ability, that's already done. DoJ did this exact thing to Paul Le Roux. Got him to admit to murders in exchange for immunity. Now he's subject to extradition to the countries they happened in. His next stop is the Philippines.

The DoJ doesn't typically claim as far as I know that they will stop prosecution in other countries.

You mean in 2045 the USG might extradite him [1]?

I wouldn't call ~20 years into the _future_ "already done". But definitely think long and hard about any agreements you sign in an adversarial situation.

TBH, the guys not even an American so I don't think he really has a right to stay in the country after his sentence is over.

[1]: https://en.wikipedia.org/wiki/Paul_Le_Roux#Trial_of_Le_Roux

OK so it's fine for DoJ to admit into public record admissions of criminal activity that can be prosecuted internationally, so long as it will be used at some point in the future and it hasn't yet been done? Apply this to Caroline. They can put it into the record so the Bahamas can use it. You say it hasn't been "already done" once they do that so everything is good. Appears we agree.

Allow Caroline to testify in exchange for lenience. Share that... so that at some point in the future she can be extradited. All good now! As far as I can tell your criticism has no practical bearing on achieving these ends.

USA's DoJ isn't in charge of other countries DoJ / equivalents. If you're going to confess to a crime you committed outside of the USA you might want to get that country also to sign onto immunity.

Or you might want to be confessing to a country you're a resident of so that you have actual standing to oppose being extradited.

Agree, which brings me full circle. Offer her a short course followed by her fate in the Bahamas. "USA DoJ isn't in charge of other countries" -- too bad so sad, what happens in fox hill stays in fox hill.

Maybe there is some way she can avoid extradition from the US, I'm not sure, but I have a feeling such a greedy soul could be lured to some other country in promise of riches only to be escorted by men with badges for a nice cruise for a Caribbean vacation.

> wealth inequality exists even in corrupt organizations.

I'd argue that it's worse in corrupt organizations. Sometimes much worse.

Is this the most white collar comment on HN? I'm sure you're also in favor of prosecuting the guys stealing detergent at CVS right?

Our little monkey brains can't really reason about numbers that big. At some point it just becomes $*illions. The Other Guys played with this for comedic effect, but you see the same nonsense everywhere.

Ellison was Bankman's principal co-conspirator, fully aware that Alameda was a bucket shop operating on money unlawfully borrowed from FTX customers, with privileged access to the exchange thus further defrauding customers, and a massive money black whole due to the trades she organized and supervised. This hemorrhaging of money bankrupted FTX in the end, not the occasional billion here and there borrowed by Bankman. Ellison couldn't have not known this state of affairs, yet she kept the lights on and most of her staff in the dark until the very last day when everything started crumbling around her.

She fully deserves to go to jail for a long time, but probably won't since she was smart enough to get the early worm in terms of deals with the prosecution.

> I mean, why even go after her for (relative) pennies?

Because when the feds go after her, she is strongly incentivized to flip, and cooperate in kicking the stool out from under SBF.

And because 6 million is big enough of a fraud that you can do a decade for it in Club Fed all on its own. If that were the only fraud that took place with FTX, she'd still deserve to be fully investigated and prosecuted for it.

There is definitely enough "crime" to go around here. In any other context $6,000,000 is a heck of a lot of theft!

> The compensation gap between SBF and his underlings just goes to show you that wealth inequality exists even in corrupt organizations.

Related to this is an interesting piece from Freakonomics[1] about drug gangs. They claim wealth inequality existing in corrupt organizations like drug gangs is a necessity.

[1] https://genius.com/Steven-levitt-the-freakonomics-of-mcdonal...

> The compensation gap between SBF and his underlings just goes to show you that wealth inequality exists even in corrupt organizations.

In the first Freakinomics book you learn that they once had found the accounting of a major drug cartel in NYC and the wage distribution from shoofer (?) on the street to the refiller, the dealer, the neighborhood lord, all the way to the top manager… was the same as at McDonald’s.

Feels like none of those laws helped, we’re stuck with a “natural distribution”.

> I mean, why even go after her for (relative) pennies?

Because it is still a crime and it would signal other criminals that they can be part of billion dollar scams, make 10s of millions and not be charged of fraud.

I cant wait to see his sentence. He's going away for decades.

For the amount he robbed and the lives he destroyed he should go away for many lifes.

Also he should already be in prison, as every second he's not spending there is a second robbed away from his jail time.

the wheels of justice move very slowly in the US. in 2014 I worked for a startup where the founder stole all the money and spent it on his lifestyle. he stole roughly 900K.

He confessed via email and I got access to the bank accounts. Took them to the same unit that is going to prosecute SBF. Took almost 4 years for him to plead guilty, he didn't spend a day in prison, and he has his whole life to pay us all back, without interest.

Naturally, he is trying to be a christian influencer in Nashville.

I am dumbfounded that they haven't yanked his bail given all the shenanigans he's been up to.

Has anyone else noticed that Sam Trabucco managed to run off without a trace? No one even mentions him much. He was Alameda's former CEO & he resigned just days before FTX collapsed

I had to look that up — he resigned in August 2022, over two months before the FTX collapse on ~November 6.

https://en.wikipedia.org/wiki/Sam_Trabucco

How can SBF ever be convicted now? Even if he spends just 10% of that in legal fees (220m), he will be able to have a legal team no government can match. He can afford to have countless mock trials and to approach countless expert witnesses before finding one that aligns with him (e.g. an expert that portrays him as ignorant rather than criminal). And these are just the legal methods to obstruct justice with 2.2B. If he is willing to stray to the illegal side, he can also just straight up pay people an unspeakable sum to testify for him. Perjury only has a sentence of several years.

Heck, he can even offer to return or donate the 2.2B (assuming only he knows where it is) in exchange of a lighter sentence. Will any government refuse that offer? 2.2B is the wage of thousands of people for 10 years.

No one with a personal wealth of more than 2B at the time of arrest has ever served a single day in jail in the United States. People only go to jail if they have lost their billions.

Your understanding of the judicial system is off. All prediction markets estimate he'll be away decades. If you're confident in your assessment, you can make a lot of money.

This just keeps getting weirder.

From the infamous irony quotes 'balance sheet': https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6c...

Liablities: $8.8bn of customer deposits

* $6.6bn-ish in USD or USDT

* $2.2bn in crypto

* I'm assuming the 'poorly labelled $8bn' is included in this amount, and you don't add it

Assets: $2.5bn?

* $1.5bn of liquid assets.

* $1bn-ish? of illiquid assets.

* Most of these numbers are just made up, but let's finger-in-the-wind them at $1bn ($500m at least is in 'locked USDT')

Now we find out they have another magical pool of money, the $3.2bn that they'd taken out of FTX and put in their pockets.

So the position looks really different: They had $8.8bn on one side of the ledger, and $5.7bn on the other side - After the massive bank run which collapsed the price of their shitcoins.

It appears they had the money to pay out most of their USD / USDT depositors at $0.85 on the dollar, which is obviously still 'insolvent', but possibly enough to survive a bank run (almost) all the way down to the ground (If you suspend redemptions of your crypto and persuade 15% of your USD depositors not to pull their money out)

The final question is: Who did they owe the liabilities to? If some of those 'deposits' were actually owed to other FTX-associated entities, it seems even more survivable, and would probably have preserved some of the value of their shitcoins

Sequoia has the rest.

We are very lucky that cryptobros are arrogant to the point of having a god complex.

In surgeons it means they have the confidence to perform some of the most difficult tasks a human being can undertake and is a net positive even though it makes them difficult to be around.

With cryptobros it makes them easier to catch after their schemes inevitably blow up because in their arrogance they refuse to consider than anyone could ever be smart enough to catch on to them.

I do not want my surgeon to 'have a god complex'. I want them to reasonably weigh the relative risks and payoffs of every job.

If the surgery is risky but the right thing, you might want people willing to take a risk in the belief they can do it and not ruin some success statistic. Might not be a "god complex" but quite a lot of confidence and ability not to panic.

Yes, and I want my surgeon who takes good risks and doesn't take bad ones.

My surgeon had (well, has, but also had) a god complex and pulled off one of the riskiest surgical procedures currently performed.

Now I can walk.

Hooray for god complexes!

My dad's surgeon had a god complex and performed a surgery within an hour of getting off a transpacific flight, confident that he'd be immune sleep depravation and jet lag. My dad died because the surgeon cut something he shouldn't have cut. Glad you can walk though.

There's definitely a question to be had, depending on the non-operable chances of the person and the availability of surgeons, whether it is worse to have one sleepy surgeon do more work at greater the risk or a fewer surgery at a lower risk.

I am very sorry about your father. I guess my question would be, given our shortage of surgeons, would we be better off if they did less surgery with the tradeoff of lower per-surgery deaths but greater deaths from waiting too long / never / rising unaffordable prices due to scarcity. This seems like a case of an awful reality where some individuals die due to even greater shortage of surgeons or fewer die from shortage but more die due to lack of sleep/etc. The answer is clear at your individual level, less clear at the population level.

To be clear, I'm not saying that was a good representation of the tradeoff in your family. But it did seem to become a real problem of tradeoffs during COVID when medical personnel were overworked. It definitely takes a certain kind of personality to make peace with "I can operate on two people who are do-or-die today and save an average of 0.8 of the two of them, or operate on one person today and save an average of 0.6 of the two of them." You'd have to go in knowing the population is better off while the per-surgery stat is worse off...

I don’t think this is an illustration of “crypto bros”, I think it’s a typical narcissistic tendency mixed with amphetamines.

There’s been numerous other scandals where we look back and could say “do you think we’d really be that stupid?”

But then again that’s a cognitive bias, because we only know of the scams/fraud that have failed

Says rocket_surgeron... that speaks volumes.

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